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It seems like medical expenses are always on the rise, and for those with high-deductible health plans, or HDHPs, the sting of healthcare costs can be harder to bear. More and more people put off seeking treatment – even for more urgent problems – because they simply can’t afford to pay out-of-pocket costs for care.
Individuals with HDHPs usually pay lower monthly insurance premiums, which seems attractive until you have to pay for costly medical expenses until your deductible is met. The IRS defines a high deductible to be at least $1,500 for an individual or $3,000 for a family. The higher the deductible, the longer it takes the reach it.
A recent study by University of California-Berkeley and Harvard University found that people with HDHPs spend on average 42% less on health care before meeting their deductibles, but it’s primarily because they don’t seek treatment due to costs, not because they shop around for a better price. “That’s where Health Savings Accounts come into play,” said Diane Bauer, Branch Manager and Lender at First Federal Bank’s Westlake Branch.
Health Savings Accounts (HSAs) are uniquely designed to help those with HDHPs by putting aside money into a special savings account that can only be spent on medical related costs. “It’s more helpful than a typical savings account, which we can access at any time for any expenses,” added Bauer, “That means we are always tempted to dip into our savings account to help pay for a new car, vacation, or big ticket item, but an HSA only allows you to use that money for qualified medical expenses.”
In 2003, the Medicare Prescription Drug Improvement and Modernization Act created Health Savings Accounts to help mitigate rising costs in the healthcare field. Contributions made into this account are tax-deductible, and when you use the HSA to pay for a qualified medical expense, the money you pull out of the account is tax-free.
“HSAs also typically have a higher interest rate, so you can earn more on your balance than with a typical savings account,” commented Bauer. “We just raised the interest rates on First Federal Bank’s HSAs to help our customers get the medical treatment they need.”
The primary requirement for applying for an HSA is to have a qualified HDHP, and the owner of the account can contribute on their own or have contributions made by their employer or another person on their behalf. Those with an HSA can also request a debit card to be used at the doctor’s office, and you use the card just like a normal checking account debit card.
“Sometimes going to the doctor for wellness exams is seen as a luxury, but it’s essential for a healthy life,” said Bauer. “The HSA account can help families visit their healthcare providers more regularly for preventative care, not only when someone has the flu or breaks a bone.
To learn more about Health Savings Accounts, contact Diane Bauer at (337) 439-3062 or visit her at the First Federal Bank Westlake Branch at 2214 Sampson Street. Please consult your tax advisor.